Community Banks: Shift to consumer lending must involve a shift in culture


Last week, BAI | Banking Strategies published an article on consumer lending (find it here) essentially stating that community banks are not well-prepared to deal with originating and, in general, dealing with consumer loans. The article suggests that community banks need to return to consumer lending. I absolutely agree. I would suggest that some credit unions also need to streamline their technology and adapt their mindset to a new way of doing business. Not all of them have received the memo that faxing paper applications to centralized lending is out. Kudos to the author of the article for developing sound reasons for the current state of affairs. In my opinion, however, there is a critical element missing.

How do we get there from here? First, we need a culture change in consumer lending.

That element is a change in culture.

Community banks, typically run by commercial bankers, subordinate consumer lending and most other activities to commercial lending. It is all about commercial. Everything, or most everything, is wrapped around that culture. It’s not a bad thing, but it does nothing to gain market share in the consumer space. If you are going to make the journey to consumer lending prominence, three key changes must be made before you contemplate the operational details described in the BAI article above. These changes are:

  1. From the board and executive management, there must be a rallying cry that commercial and consumer are equal partners in the advancement of the institution’s lending business.
  2. Management must them make the organizational and process changes to transform the battle cry into a full-fledged attack. This includes equality in terms of roles, compensation, and strategic input.
  3. Marketing who you are must change. It can no longer be a “we-do-consumer-loans-too!” approach. If consumer lending does not ascend to being a true equal in the marketing effort, staff and customers will discount the validity of the first two changes.

It’s important to state that consumer lending is not for everybody. That’s okay, too. However, if you are going to make the shift, pay consumer lending more than lip service in your culture and get down to the business of making loans.

Before beginning a branch project, plan & prepare.

Now that we’ve gotten beyond that gripping headline, let’s talk about what you should and should not do before starting a branch network realignment project.

What you should do:

  • Write down, as best you can, why you are embarking on this project. What is the purpose? Who will be involved? What other areas might it affect?
  • Create a spreadsheet. The following columns should be on it:
    • Name of branch
    • Location
    • Open date
    • Number of employees (in FTEs)
      • Management
      • Tellers
      • Platform
      • Loan officers
    • Number of teller stations
    • Number of platform stations
    • ATM – yes/no
    • ATM location – drive-up, walk-up in, walk-up out
    • Document product levels
      • Deposits – $ & #
      • Loans – $ & #
      • Ancillary products – $ & # (insurance, investments, etc.)
    • Number of transactions
      • Teller
      • Platform
        • New Accounts
        • Loan Applications
    • Revenue
      • Interest income
      • Noninterest income
      • Total income
    • Expense
      • Interest expense
      • Noninterest expense
      • Total expense
    • Net income
  • Take a deep breath, and repeat after me, “Ommmmmm, Ommmmmm.”
  • Write down, as best you can, why the organization chose each branch location.
  • Form a committee with a critical guideline in place: no decision will be made until the data has been reviewed. There are no favorites, although there may be some obvious candidates.

What you should not do:

  • Get emotional. Always remain objective.
  • Decide before you abide by the rules and data collection methods above. There is no room for sentimentality in this process.
  • Alert the media. Branch network modifications can be a sign of internal panic and external weakness. This should be a confidential project.

A third party can help you keep things objective. To that extent, we would love to help you with your branch project. When it comes to your business, “Objective, unbiased, and discreet” is our middle name. Imagine that on a birth certificate.

You can reach me at 908-368-1270 or via email at

Go where the grass is taller: lawn care for the banking business

Photo © Jon Helgason | Dreamstime Stock Photos

The grass may always be greener somewhere else, but we really should tend to the tall grass in our own backyard first.
Photo © Jon Helgason | Dreamstime Stock Photos

I know. That’s not what we typically hear. “Go where the grass is greener,” tends to be the norm. Or, something like, “sort out your life and the grass will always be greener for you, miss,” tends to emblazon the pages of self-help books and fly from the hallowed talk-show pulpits. Organizations don’t need us because the grass is greener. They need our help and our acumen because they are typically in the tall weeds, in the uncut grass.

The weeds occur in several different areas. Where we see them the most are in the following areas:


  • Markets are poorly defined; therefore, everything from messaging to products is not clear for each market.
  • Messaging is more about us, and less about them, the customer.
  • There is tons of data, Big Data if you will, but most of it is chaff. We need get to the grain.


  • Simple is better sometimes. Start there with the design, and see where it takes you.
  • Check that. Start with the customer and work backwards.
  • Operations is a means and not an end.


  • Start with the customer and work backwards. That is, do what you ought to do to serve while ensuring you can pay for it.
  • Work toward streamlining performance management, both financial and non-financial.
  • Let finance be a tool to drive initiative.

These are just some of the items that crop up where the grass is taller. Another big issue is the disconnect between these three essential functional silos. You must do everything you can not to let that lack of collaboration be the overarching, life-killing weed.

So, don’t always opt for where the grass is greener. That’s not a life worth living. Go where the grass is taller, the challenge is greater, and see if you can make a difference. Also, go because it’s what you know, inside and out, that’s what you want to do. There’s no need to starting cutting with a dull blade.

Cue the lawnmower.

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2015′s First 15 – #5. Technology and Banking as a Process

In the Wrong Place

With today’s ever-changing banking technology, are your processes in the right places…at the right time?
Photo © Georgios Alexandris | Dreamstime Stock Photos

Technology continues to be the rainmaker in society. Inputs. Processing. Outputs. It all begins with an assessment of the marketplace to gain a thorough understanding of customer demands. As part of this next series – Process, People, Place, and Performance – I believe process represents the headwaters in the delivery of great service and great product to your  customers. Yes, I know, technology and banking processes have been beaten to death. That’s just it. First of all, we don’t need to beat anything or anyone. Well, not in the physical way. We need to design a simple and elegant process. Second, process will drive the subsequent three components. Finally, let’s not overcook it. Complexity breeds job security for those who create it, and in a world where we need more and more jobs, this appears to be rational. Let’s ensure that we aren’t being complex just for the sake of complexity. Instead, let technology be your friend in this phase of work.


To paraphrase Dr. Stephen Covey, ʺBegin with the customer in mind.ʺ This is the most important thing you can do in process design. Any process design. Now, there may be subcomponents where all paths do not lead to the customer, and that’s certainly reasonable. As the design continues, let it do just that. First drafts are written for a purpose, and that is to get all the thoughts and ideas on the table. Second and subsequent drafts are for clean-up. Finally, use a reasonable mix of written-word and graphic elements. All of it should be done with the ʺsecond creationʺ in mind: employee training and customer instruction.


If you are fortunate, the inclusion of people, place, and performance will happen without much thought. Who will function at which point in the process? Where – in which place – will the process prevail? How much did it yield? Yield should also be measured in terms of the customer, balanced with a healthy bit of yield for the institution.


We started our discussion talking about technology. Technology, as I first learned about it, is the presence of a catalyst that converts inputs into outputs. End. Full stop. Digital technology, cat plus meow, enables us to bring disparate components such as process, people, and place, together in a particularly efficient and effective manner. This collaboration, which before tended to be sequential in nature, has come a long way. But, development is still functional in nature and not process in nature. Code it wisely. Use it wisely, I say.

Process review and reformation, which is sorely needed, begins and ends with the customer. Through better design, incorporation of the principal components of service delivery, and collaboration across functional components, firms can bring about better process, and indeed, a better world. Well, maybe not right away, but let’s see where it takes us.

2015′s First 15 – #4. Banking as Reviving: Can I get a witness?


Reviving the community financial institution through giving, living, and believing.
© Steve Mann | Dreamstime Stock Photos

Giving. Living. Believing. As you can see from the key words in our recent posts, we are into gerunds here at Reconn Consulting. Our last one in this series, reviving, encapsulates the first three. Let me explain.

What is a revival? You might describe it, as some dictionaries do, as a time of reawakening or a sense of restoration. The community financial institution is evolving as it continues to provide a sense of place and people in communities across the country. It also needs a bit of reviving. This exercise does not discount the effort put forth by community FIs across the country. Not at all. It begins to understand and calibrate the challenge that awaits, and where our focus should be.

The community changes. Moving from a terrestrial community, defined by physical and environmental boundaries, to a virtual community remains a fundamental component in the massive shift in the industry. Along with growing regulation and unheeded consolidation and scale economies, community financial institutions seemingly don’t stand a chance. Some, admittedly, will not make the journey. However, and with an eye to optimism, some will make it and continue to be successful. Reviving banking is a journey that begins with the following three steps.

Give it your all. Give it without expectation. It’s not charity, but it’s work. Raise the social consciousness of your institution and I firmly believe you will be rewarded, having never asked for anything. And, as I said, it’s not charity. Do what you have to do and move on. You are the catalyst for good in your communities and not just by the checks that you write and the dollars that you raise. Your work is your gift. Your work is your revival, and it matters not whether it is bricks and sticks or bits and bytes.

Freedom of expression and freedom of motion. Customers out there live for these things. Enhancing the life of our communities should be a paramount goal for your financial institution. The measures change now, too. So, it is not about how well you are doing, but it is about well the customer is doing. Beyond that, how is the life in your community-at-large changing? We say this understanding and appreciating that there are other factors in play beyond the community financial institution’s influence in any given area. We believe that your influence is part of your revival.

Delivery is the culmination of your work and your influence. Recheck systems. Update your people, and in most cases, your systems. Better your process. Scale will be an important ingredient in your long-term survival. To build scale, you need more customers. Not only that, but you need your customers, the ones you feel you can best serve. Their belief in you aids in your revival.

A final thought is this: don’t let them see you sweat. In the classic religious sense of the word, revivals, and the tent or temple in which one gathers, are oftentimes places where incredible journeys take place. They are not easy. There will be failure, there will be success, and there will be many days of, well, a whole lot of nothing. Steady yourself and your team through it all, which, in turn, is an altogether different revival.

Let’s do the inventory dance!

Disco feet

Photo courtesy of Alison on Flickr

Your deposits. They’re on the proverbial shelf. They aren’t doing much for you. Deposits are much like inventory. You need to move some inventory. Can you feel the groove? Can you feel it?

It’s a simple concept, right? Manufacturing companies and retailers alike manage their inventory to a tee. They sweat every detail. When, how much, what time, and over what distance will we need to move these shelf killers? Does the banking industry need to add an element of this rigorous oversight to their daily-to-quarterly performance tool kit?

“Well,” you say, “we already watch the loan-to-deposit ratio like a hawk.” True. Throw in some asset-liability management and you’re all over it. It’s more of a mentality of watching versus actingMoving inventory, or converting deposits into loans, should be the eternal preoccupation of every community banker in the land. How much do we have? When is it going out the door? Who is buying? Where are the target communities that want some of our product? Campaign management is a key aspect of converting inventory into product, deposits into loans. Are you leading the charge?

As you think through this, here are some quick steps in the inventory dance:

  • Don’t overthink the process. Realize up front that there will be missteps and, at times, it may sound like the music has stopped. It hasn’t until you say so.
  • Get out on the dance floor. So much of what we do tends to be about guarding what we have, and not finding our groove in the lending marketplace. To do this, you must surveil the landscape methodically, but quickly. It can be done.
  • ALM has a role. The pertinent aspect of this is that you should know at all times what the mix should be; however, there must be some flexibility. The market will dictate what inventory you should move and what the final product, the loan, looks like.
  • Reviewing enterprise-wide risk is a necessary undertaking. Here are the seven categories, neatly arranged by the folks over at the NCUA, upon which we like to shine the light:
    • Credit
    • Interest Rate
    • Liquidity
    • Transaction
    • Compliance
    • Strategic
    • Reputation
  • You’re not selling. Well, you’re sort of selling. What you are doing is engaging others on the dance floor. “This is our song,” you say. “This is our groove. This is our way of bringing the magic of our institution to you.”

The most important thing you can do tomorrow is step outside your office and discreetly inform the staff that it’s time to boogie. It’s time to do the inventory dance. Oh, and don’t forget your dancing shoes.

Do you want to dance?

Photo courtesy of Bob_Doran

Photo courtesy of Bob_Doran

It’s a question that fourteen-year-old teens fear the most after, “Have you finished your homework?”

“Do you want to dance?”

It’s a question that not only strikes fear, but it begs you to check all the key components of your arsenal before saying yes, or even asking the question. How’s my outfit? What about my hair? Are these shoes the right shoes? What about my hair?

As a banker, it is a moral imperative (Where have I heard that before?) that you ask the question each and every quarter at least. You must ask it of yourself, your employees, your commercial partners, and of your customers. As you contemplate asking the question, and certainly before you’re hitting the dance floor, here are some key components you should consider:

  • Marketplace understanding
    • What and where is your market? This needs to get down to the census tract. Okay. Down to the parquet tile.
    • What is your share of the market? This is not always easy to measure, even in an industry such as banking. And what about loan market share? That’s always a tough one.
    • Do you have the right access points as well as the right number of points? How well are your access points doing?
    • Are you willing to exit and enter markets for the benefit of the institution and set aside your emotion in doing so?
  • Operational readiness
    • Have you put effort into making sure that process meets market? Do you have your operational dance steps figured out?
    • Digital technology is a wonderful construct. It can also be an impediment to making a human connection to your customers. Are you using digital technology optimally? In this case, optimal equals efficiency and effectiveness both in your market and for your institution.
    • Are you ETDBW*? After all, ETDBW is so sexy on the dance floor, right?
  • Financial safety, soundness and adventure
    • Have you analyzed the potential financial upside and pitfalls of hurling yourself out onto the dance floor?
    • Safety and soundness are must-have components in your repertoire; however, doing nothing out of fear of loss oftentimes leads to obsolescence, which can lead to obscurity.
    • Embrace a sense of adventure. Yes. Even in your financial analysis and direction, have a sense of adventure. Sometimes you may go to the edge of the dance floor, but that may be the better path than clinging to the wall.

I’d like to add one more thing here. The parents. The board, the regulators, and the auditors are the parents in our little story. They will shroud you and your team in reasons why you should not dance, why you shouldn’t ask the big question. They may even make you so harried that you want to give up. Don’t give up the dance, my friends. Keep the beat. Shuffle those feet.

*ETDBW – “Easy to do business with.”

Shiny Happy People

happinessJust go with me here, folks. With all deference to the 80′s band, REM, the title of our post is not about a catchy pop tune with great harmonies by the ladies of another 80′s band, The B52s. Indeed, it is more about the three words. Shiny. Happy. People. With the advent of more and more technology, incremental as it is, and regulation, institutions both public and private have emphasized haute couture over and above purpose, chivalry, and service. Let us explain.


It seems we have, with some level of investment, turned our energies towards making everything nice and shiny. Appearance has become the mainstay of advertising. The glow one has supersedes the energy one commands. Shiny new things – clothes, computing devices, castles, and cars come to mind – demand our purchasing power. I get it. I like new things, too. Finally, all institutions have stressed having things over being something. And, even when being something has been the focus it is that way because of the end goal of having something.


Happy is another thing altogether, but it has been corralled into a station in society that again maximizes aesthetics and the impermanent and diminishes the human consciousness and the permanent. As institutions, specifically financial institutions, deal with this term and its many variants, several items to consider come to mind.

Responsibility – the customer is ultimately responsible for their own happiness. Having said that, we shouldn’t give into the dark side of marginal and shallow programs that emphasize form over function, skin over sinew.  That is our responsibility.  This is an internal focus as much as it is an external focus.

Reflection – think first and then act. However, don’t overthink it. When an inflection point occurs in the institutional life cycle, one must be prepared and one must be ready to reflect on the change. How does the leadership circle process change? What elements should be considered? We believe there are six key elements. More can be found here.

Reverence – no matter what, be thankful for, and to some degree, fearful of, Nature’s majesty. In the vein of shiny above, we have elevated ourselves to the position of doer, of maker. We are not. As we consider our responsibility and reflect on the possibilities, we must understand we are here to do what we need to do. Serve our purpose, and, yes, get out. All the while, we must understand and appreciate we are but a speck.


This one is a little simpler. Treat others as you would like to be treated. People are impermanent. Systems, too, are impermanent. Don’t get caught up in shiny over happy. Put others’ happiness above yours and there will be a greater reward for all. Oh, by the way, it’s not easy. Changing ourselves from the inside takes real work. Transferring that change to others is almost impossible.

But, it’s worth it.

The Challenge of Interdependence Day


How ’bout them fireworks?


During a recent client presentation, I shared a great deal of information with a stellar group of professionals in the financial services arena. About half-way through my presentation, I made a reference to a lesson I learned many years ago when I worked for a large financial institution. Here and there, words and phrases that have become a part of my professional advisory process found their way into the conversation. And then it occurred to me. Those ideas were certainly the result of 25 years of my own personal professional experiences, but also the experiences of my former colleagues, managers, and professors.

As a consultant, I have always prided myself on my ability to provide fiercely independent analysis and direction to our clients. And as an American, I am independent down to my red, white, and blue core, right?

But in reality, I’m neither a rock nor an island. From the educators that gave me the facts and insight that opened my eyes to the world of economics, to the lessons I learned when I first started out in the banking business, to the current projects I am currently leading, I’ve learned something new along every step of the journey with the help of so many different people.

So, on this Independence Day 2014, I challenge you to go beyond independence. I call on all those that believe that independence is the ultimate to grab a pencil and piece of paper and follow along. Or not. You are, after all, free to do as you please. Well, I say that knowing there are provisos, and, of course, limitations.

Force is never forceful

Independence is the direct result of having, on prior occasion, terrible dependence on some other force, be it voluntarily or involuntarily. Many have come to understand, unfortunately much later than they would prefer, that force is not forceful. That is, force cannot make a person do what they do not want to do. So, be it with ourselves, our spouses, our children, or our colleagues, force cannot lead to a positive and replicable outcome: trust. The same applies to systems-level thinking, such as religion, political and governmental systems, and social structures. Force does not work. In my readings of late, this concept often crosses my path.

In the graphic below, with force, we seek to contain a person to inside the circle. That simply will not work.


Independent living demands all of you

Independence and freedom are oftentimes linked to one another. The reality is that both require a great deal from the individual. And both of them require a great deal of focus on your duty to yourself, your family, your community, and then, ultimately, to all beings. Independence comes when you are able to think for yourself, create a new paradigm, and enliven your intellect. It does not mean that you can do whatever you want. For doing whatever you want will ultimately force someone else to live by that paradigm, which we decided is not forceful and is certainly not helpful.

Independence means to move outside your circle, but it still places the focus on person #1 in your life, you.

Interdependent thinking challenges you to go beyond

Change the arc of independence and challenge yourself to think interdependently. Dr. Covey spoke of interdependence in his classic, The Seven Habits of Highly Effective People. On this Independence Day 2014, do not think solely on the independent nature of those around you. Thank those around you and honor those that have gone before you for they have provided a  great deal of advantage in the life you lead. More importantly, strive to leverage your independence to advance an organization, a nation, and a planet by employing a culture of interdependence. Go beyond yourself.

Happy Independence Day!